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House of Representatives
Session of 2017 - 2018 Regular Session


Posted: April 25, 2017 01:07 PM
From: Representative Brett R. Miller
To: All House members
Subject: Pension Fund Fee Transparency Legislation
In the near future, I intend to introduce legislation that will require more robust and transparent management fee reporting standards from SERS and PSERS.

Most public retirement systems pay performance-based fees and expenses to external investment managers as part of their compensation, but these fees, particularly those associated with alternative investments such as private equity, real estate, and hedge funds, often go unreported or under reported. These hidden fees can amount to hundreds of millions of dollars which ultimately take away from pension fund balances needed to pay pension obligations.

Although SERS and PSERS do provide some information concerning the fees associated with portfolio management, my legislation will increase transparency to the taxpayers and plan participants by requiring the SERS and PSERS yearly comprehensive annual financial reports to include a broader range of costs incurred from management and performance fees, particularly fees associated with carried interest.

The increased reporting requirements are modeled after the Institutional Limited Partners Association's (ILPA) Fee Transparency Initiative which is a national effort to establish comprehensive standards for total fee and expense reporting by private equity managers and their investors. These reporting standards have already been formally adopted by 20 states and the District of Columbia. (Note: Currently, PSERS and SERS are voluntarily utilizing some of the ILPA reporting standards. This legislation would require their use.)

Because fees and expenses can have a dramatic impact on the health of a pension portfolio, and because asset allocation and fees show the health of a pension plan, adopting the ILPA standards will help ensure the solvency of the plan by exposing potentially high and unnecessary management fees. Further, taxpayers and plan participants have a right to know the full extent of plan expenses. Adopting these standards will ensure maximum transparency and openness to both taxpayers and plan participants.

Please join me in co-sponsoring this legislation to improve public pension management/performance fee transparency to help maximize returns and improve the overall health of our public pension funds.

Introduced as HB1460